|
|
|
 |
|
|
|
|
|
Offshore Trusts |
| |
|
| |
Different Types of Offshore Trusts
Trusts have their origins in medieval England when they were associated
with knights making provision for their families when they went away to
fight in the Crusades.
An offshore trust enables
an individual (the "settlor") to donate assets to a neutral third party
or guardian (the "trustee"), who holds the assets and administers them
for the benefit of other individuals nominated by the settlor and in many
cases the settlor himself (the "beneficiaries"). An offshore
trust arrangement is normally recorded in a written document (the
"trust deed").
The effect of creating an offshore
trust is to shift the burden of property ownership onto a trustee,
while retaining the benefit of the property for the beneficiaries.
An estate created under the will of a deceased person is a trust. A trust
created by a person prior to death is known as an inter vivos trust. Most
trusts created offshore are formed as inter vivos trusts.
As trusts are a creation of English common law, the most suitable location
for an offshore trust is a jurisdiction which has English common law and
equity as the foundation of its legal system.
An offshore trust may
be established as either revocable or irrevocable. A revocable trust may
be terminated or varied by the Settlor either at the end of a specified
period or at any time. An irrevocable trust cannot be terminated by the
Settlor nor can the Settlor vary the terms of the trust. Whether a trust
is established as revocable or irrevocable will depend upon the objectives
and circumstances of the Settlor.
Both revocable and irrevocable offshore trusts may be either discretionary
or fixed interest trusts. Under a fixed interest trust the interests of
the beneficiaries are specifically fixed in the terms of the trust deed
and the trustee has no power to vary those interests. A discretionary
trust on the other hand gives the trustee the power to determine the allocation
of income and capital amongst the members of the beneficiary class and
to vary the membership of the beneficiary class. The flexibility provided
by the discretionary form of trust is often necessary to satisfy tax planning
objectives.
In the case of a discretionary trust, the trustees will have wide discretionary
powers (although they may sometimes be constrained by the requirement
for the consent of a third party or the protector), the trust deed will
often be supplemented by an informal and confidential letter from the
settlor or grantor to the trustees setting out his wishes on such matters
as the amount and timing of distributions, investments, employment of
advisers, those who should be regarded as primary beneficiaries and so
forth. While this letter is non-binding and intended for the trustees'
guidance only, the trustees will generally respect the settlor or grantor's
wishes and strive to act in accordance with them.
Most offshore trusts fall into four broad categories:
- Private: including discretionary,
accumulation and maintenance, life interest and fixed interest trusts.
- Corporate: including pension
and employee benefit trusts.
- Charitable: solely for the
benefit of charitable organisations.
- Purpose: trusts with no beneficiaries
that are established for purposes that are certain, reasonable and
possible
Modern offshore trust deeds can be tailored to meet your specific requirements.
Generally they are worded in the widest possible terms to allow a trustee
scope to respond to changing circumstances and requirements.
Discretionary Trusts
The most flexible form of offshore trust and used in wealth protection
and tax planning. A discretionary offshore trust will normally allow the
Trustees to appoint additional beneficiaries or to remove existing beneficiaries,
and will usually also allow the Trustees to distribute the income and
capital of the trust to the beneficiaries in varying amounts and at various
times. When a Settlor establishes a discretionary offshore trust he will
generally provide the Trustees with a Letter of Wishes, which provides
guidance to the Trustees on how he would like them to administer the trust
and manage the assets.
Interest in Possession Trusts
These differ from discretionary trusts in that the beneficiaries will
be entitled to receive income and capital from the trust as detailed in
the trust deed.
Accumulation and Maintenance Trusts
Almost always established for the benefit of children. The offshore trust
deed will specify that the trust fund be used for the education and maintenance
of the children up to a certain age with surplus income being accumulated
by the offshore trust. Once a predetermined age has been reached the beneficiaries
will be entitled to receive income and capital from the offshore trust
as detailed in the trust deed.
|
|
|
|
|
|
|
